How to Start an Electrical Business?

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Want to start an electrical business but scared as you are not aware of the right steps? Don’t worry; anything new scares us. We are here to guide you on how to start an electrical business.

Have you decided to start your own electrical business? Of course, you have decided, and that’s the reason you landed on this page, right? 

When it comes to starting your own business, you don’t know much about the process, steps, and techniques.

To help you know, how to start an electrical business, we will guide you through everything. With the required knowledge, experience, and license, you can easily enter the market.

1. Find a Suitable Location

Accessibility of your business operations is crucial in the achievement of high-profit margins. Not only your existing target market but the potential customers will also choose you since they find it easy and time-savvy to get benefited from your electrical services. 

So to find the location of your new electrical business, it is necessary that you select the area where most of your target market exists. 

However, to determine the exact location of your electrical business, four factors are essential that you need to consider:

  • Is there any other electrical contractor working, or any electric store around you?
  • Even if there is an electrical store near you, check whether the audience is pleased with the services, they are offering or not. 
  • Was there any electrical store in the past, whose owner has just relocated or stopped delivering commercial electrical services?
  • Are there several electrical stores in existence? But the renowned electrician has just relocated to a different region.

After considering all these points, you can start your own electrical business in your desired area. Even if you are giving most of your time rendering electrical services to your commercial or residential customers, opening a small electric shop is advisable.

2. Get the Training and Licensing Requirements 

Before operating as a professional electrician or electrical business owner, a state-issued license from the state’s electrical licensing department or general professional licensing board is mandatory. 

However, the electrical licensing requirement regarding the applicable tests and licenses will vary from state to state and region to region.

The same license must be renewed every three years. On the contrary, professional electricians in Texas also require a license to work on electrical jobs, and it must be renewed annually. So, these are the variations that we can usually see in electrical licensing requirements

3. Choose a Legal Business Structure 

The legality of your electrical contractor business is essential. Before operating as a small electrical business, you should work on the business structure for your business. There are typical options available which are:

  • Limited liability company (LLC) 
  • Sole proprietorship 
  • Partnership 
  • Corporation

The business structure solely depends on individual preferences. 

  • If you are a sole person who wants to control the whole business on your own terms, then a sole proprietorship will work for you. 
  • However, if you are two or more persons willing to own an electrical business, then a partnership is an option.
  • The one who is establishing their new firm as a limited liability corporation (LLC) will get more benefits. LLC will safeguard electrical business owners’  assets if the company is legally troubled and held liable for damages. 
  • You might also think about setting up a corporation if you want to get funds from lenders. This is because lenders usually prefer that your personal assets remain protected, and your electrician business bears the burden of the loan. Along with this, they also appreciate the credibility of corporations and LLCs.

4. Get Registration for Taxes

Get your electrical business registered for a variety of different states & federal taxes. Before registering your business for taxes, you will be in need to apply for EIN.

    What is EIN?

    It’s an Employer Identification Number (EIN), which is freely available through the IRS website, via fax, or by mail. This 9-digit unique identification number will allow IRS (Internal Reporting System), to identify your electrical business for the purpose of tax reporting.

5. Design a Business Plan

You will be in need of an effective business plan. This plan can be presented in front of banks, investors, or third parties, to generate funds. This will build your brand and trust more strongly before them.

    Here’s what your electrical business plan should consist of:

    • Cover page of your business – Name, logo, and contact information.
    • Detailed executive summary – Who you are, what are you focusing upon & what makes you unique.
    • Business overview – A short summary of your business structure and required registration details.
    • Vision & mission statement–  Where you are now, and where do you want to reach?
    • List of services you provide– Full list of the electrical services like electrical wiring, electrical installation, etc.
    • Deep market analysis – Detailed observation of your target market and the competition in your region.
    • Business operations – Overview of implementing planned strategies into the business.
    • Marketing and sales – Pen down your marketing strategy and sales goals. 
    • Financial plan – A quick view of the money coming into and going out of your business at least for the initial years. It should include your sales forecast, a detailed budget for expenses (like electrical software and equipment), and marketing costs.

6. Create a Financial Strategy

Operating the business on our own can be quite pricey. Electrical contractors need initial startup costs ranging between $5,000 to $25,000 on hand. The cost can be used for:

  • purchasing the relevant tools and equipment, 
  • advertising the same,
  • hiring and training electricians, etc.

Many businesses do not have huge bank balances in their savings account, so, they are left with a few financing options mentioned below;

  • finding their own venture
  • getting a small business loan from a bank,
  • borrowing from a third party, they can be friends, family, and relatives
  • applying for small business grants from local governments.

This way, you can create your financial plan based on your needs, preferences, and standards. 

7. Set up the Business Accounting

The way you are keeping your personal and professional life separate, in the same way, you need to use a separate business bank account for your successful electrical business. 

This will ensure the protection of your personal assets over the company’s assets. Prior to this, when your personal and business bank accounts were mixed, all your assets that were in your personal possession came at risk. 

Apart from this, you can streamline your accounting activities by using Quickbooks online, which is synced with InvoiceOwl, a leading automating software for creating estimates and invoices for your business.

Knowing the fact that QuickBooks Online Sync can increase productivity by 30%, you must use this to boost your accounting operations. It will help you keep your business’s finances organized and, manage your electrical inventory efficiently. 

8. Insure Your Business

No wonder, the electrical business is a dangerous one. You need to get business insurance, for protecting yourself, and your electrical workers. 

Communicate with the insurance provider, and get the right type of coverage for the electrical services you provide. Some of the insurance coverages you may include are

  • General liability insurance
  • Professional liability insurance
  • Commercial automobile insurance
  • Workers’ compensation insurance 
  • Equipment insurance
  • Property insurance

9. Purchased the Required Electrical Equipment 

After considering the above-listed points, you should almost have a drafted plan ready in your hands. Now, it’s time for execution. Stock your electrical business van with the right tools and equipment that makes your electrical jobs easy. 

    Here’s what you are required to purchase before your first electrical work:

    • Voltage tester
    • Wire cutters
    • Screwdrivers
    • Pliers
    • Fish tape
    • Electric drill
    • Flashlight
    • Level
    • Tape measure

Other than this, the purchasing list may vary depending on the individual needs, and specifications. Creating professional purchase orders in just a few clicks. InvocieOwl helps you track your expense by creating professional purchase orders in minutes.

10. Know How to Price Electrical Services 

Being an electric estimator, you should know how to estimate electrical work accurately to win more jobs, ultimately growing your own electrical contracting business. But before you get down on the pricing strategies, there are two essential factors you should look upon. They are

  • List down the commercial or residential electrical services that you are offering
  • Create an estimate template

Note down the electrical services you are offering:

10.1 List down the services you are planning to offer

For example, if your target audience is residential customers, your services may include

  • Installing a doorbell, alarms & gate systems
  • Electrical setup and rewiring
  • Electric panel installation, upgrading, and replacement
  • Complete house surge protection
  • All lighting requirements – fixture installation, replacement, and repair
  • Smoke and carbon monoxide detector installations
  • Electrical safety inspections
  • Wiring a new outlet or switch

Then jot down the materials you will need to complete each job, determine your hourly rate, calculate your profit margin and create an estimate template.

10.2 Create an estimate template

A customized estimate template should be created to pitch more lucrative jobs. It should contain

  • Electrical business name & logo
  • Contact information 
  • Customer name & contact details
  • Estimate number & date
  • List of the services you will be providing 
  • Estimated cost of services 
  • Validity of the estimate

11. Hire Employees to Grow Your Business

What hiring practices should your small electrical firm follow? Read about how to hire your first employee. If you’ve never done it, consider your electrical business’s particular requirements. To begin with, you should have only qualified electricians handle any job you do. What sort of electricians will you require, though? Office workers, journeymen, or apprentices?

12. The Technical Stuff: Scheduling, Invoicing, and Payment for Electrical Business

As a business owner, you manage every aspect of your enterprise, including scheduling appointments and delivering bills. In addition, tons of administrative work must be kept up with. We’ll offer you an outline of all the technical considerations you must make when managing a business to assist you.

These consist of the following:

  • Making appointments: You will need to keep a record of the leads, prospects, clients, and appointments for your new electrical company. 
  • Sending receipts and invoices:  After every job is finished, you must prepare an invoice and send the same to your clients for quick payments.
  • Payment options: Although you can accept cash payments, it’s preferable if you also accept credit cards.
  • Accounting: Be sure to keep account of your receipts and outlays. Additionally, you organized your books so that you could be prepared for tax season. 

To meet your estimates, invoices, payments, and reporting needs, you can opt for InvoiceOwl, which will make things easier than ever. It will make the time-consuming tasks of creating and sending estimates & invoices to clients simpler.

In just a few clicks, you can produce professional-looking estimates and invoices, wow your clients, and land more projects.

    Let’s understand this with an example:

    Steven is an electric contractor dealing in this industry for the last few years. Have a look at steven’s query and how InvoiceOwl can help resolve it.

    Steven’s query: I often get stuck in my hectic schedules and want something that offers real-time notification for my electrical estimates & invoices.

How Much Does it Cost to Start an Electrical Business?

In order to generate profitable margins, it is very imperative that you have a strong focus on your cost structure. At least you need $5,000 to kick-start your electrical businesses. This is because of the various costs involved. It is bifurcated into three categories:

  • Personal finances
  • Potential overheads
  • Location

The Urge for Starting an Electrical Business

The electrical industry is directly in relation to the growth of construction work.  As per the reports of IBIS world, the electrical industry has performed well over the last five years to 2022. 

  • The growth in important downstream construction markets
  • Low-interest rates
  • Increasing per capita disposable income

Access to credit has driven the revenue growth of the electrician business. However, in 2020, due to the spread of COVID-19, the value of nonresidential construction and industrial production demand fell, which negatively impacted the electrical industry. 

Though industry revenue growth has been limited, the electrical industry has still benefitted from the increasing demand for residential construction work after COVID-19. It has grown at an annualized rate of 2.2%, which is $225.4 billion over the period of five years to 2022. The electrical contractors experienced an increase of 0.9% and 1.6% alone in the years 2021 and 2022, respectively. 

Isn’t these all fascinating? Yes, right? So without any further ado, let’s get started.

Frequently Asked Questions
  1. How much cash do I need to launch an online business?

    A ballpark estimate is between 9,000 and 70,000 USD. To open your business, you must have approximately 40,000 USD on hand.
  2. Is the electrical industry viable?

    Yes, the electric industry can undoubtedly be regarded as one of the top business ideas, given the quick advancement of technology. Electrical engineers have a potential job possibility in this field.
  3. How does invoice software help electrical contractors?

    Estimating and invoicing software for electrical contractors like InvoiceOwl helps in automating the entire estimates and invoices process in just a few clicks. Not only this, electrical contractors can create instant estimates to win more jobs and beat their competitors. Apart from this, there are many other benefits of using InvoiceOwl software.


Every electrician’s decision to start an electrical business is significant. You progressed from an apprentice to a journeyman to a master electrician of your craft before starting your own company. 

This next step may make greater adaptability, creativity, a sense of accomplishment, independence, and prosperity.

Author Bio
Jeel Patel
Jeel Patel

Jeel Patel is the founder of InvoiceOwl, a top-rated estimating and invoicing software that simplifies the invoicing and estimating processes for contractor businesses. Jeel holds a degree in Business Administration and Management from the University of Toronto, which has provided him with a strong foundation in business principles and practices. With understanding of the challenges faced by contractors, he conducted extensive research and developed a tool to streamline the invoicing and estimating processes for contractors. Read More

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